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Powering the Future: Navigating the 2024 Battery Industry Landscape - Price Wars, Innovations, and Opportunities Unveiled!

iconFeb 26, 2024 09:54
The battery industry faces a turbulent 2024 with price wars, cost reductions, and overcapacity. Despite challenges, innovations in technology and strategic shifts promise opportunities for growth.

In 2023, the battery new energy industry chain is unprecedentedly turbulent, and the performance is mostly not optimistic. However, many industry insiders predict that 2023 will be the best year for the battery new energy industry in the next 10 years.

At the beginning of 2024, the problems of price reduction and inventory reduction in the battery new energy industry have not been eased, and a price war has begun.

In terms of automotive companies, BYD, Changan Qiyuan, NIO, SAIC-GM Wuling, Geely, Beijing Hyundai, Buick, and other electric and traditional car manufacturers have initiated a price war, aiming to capture more market share.

As noted by Battery China, the power battery, as the core of electric vehicles, accounts for about 40% of the total vehicle cost. The price war among car manufacturers is closely related to the rapid decline in the cost of power batteries.

As early as 2013, Guotai Junan Securities predicted in a research report that lithium battery prices would halve in the next 5 to 10 years. In terms of market performance, the battery industry has become increasingly competitive in the past two years, shifting from scarcity to surplus and experiencing fluctuations from a boom to a downturn.

According to data disclosed by Sullivan, since 2017, the overall price of lithium power batteries in China has been on a downward trend. The average price of lithium power battery cells has decreased from 0.75 yuan/Wh in 2017 to 0.52 yuan/Wh in 2021. However, in 2022, due to a significant increase in upstream material prices, the average price of lithium power battery cells surged to 0.79 yuan/Wh. In 2023, with the decline in lithium battery material prices, the estimated average price of lithium power battery cells is around 0.55 yuan/Wh.

The main reasons for the decline in the price of power batteries are the significant fall in raw material prices and the cost reduction brought about by process improvements in power battery technology, coupled with market competition resulting from excess production capacity.

Chairman of GAC Group, Zeng Qinghong, publicly stated in July 2022, "The cost of power batteries accounts for 40%, 50%, or even 60% of the total cost of cars and is constantly increasing." In that year, the price of lithium carbonate, a raw material, reached a historical high of nearly 600,000 yuan per ton.

In 2023, the spot price of battery-grade lithium carbonate is 262,000 yuan per ton, nearly halving compared to the previous year. At the beginning of the year, the price was close to 600,000 yuan per ton. By the end of the year, in both futures and spot markets, the price per ton of lithium carbonate had dropped to below 100,000 yuan, with a price drop of over 83% throughout the year.

As of February 23, according to data from the Shanghai Nonferrous Network, the quoted price for battery-grade lithium carbonate is 93,500 to 99,000 yuan per ton, with an average price of 96,300 yuan per ton, an increase of 100 yuan per ton from the previous working day.

Overall, the quoted price of battery-grade lithium carbonate is stable within the range of 100,000 yuan this year, creating space for a decrease in battery costs.

In addition to fluctuating raw material prices, battery manufacturers are also focusing on restructuring processes and optimizing the improvement of battery materials. Through new process improvements and the application of new technologies, they aim to establish a leading position in the relevant battery field, form a competitive advantage through differentiation strategies, and thus generate strong industrial profits.

According to EVTank data, in terms of production capacity, by the end of 2026, the planned total capacity of 46 global enterprises within the statistical scope will reach 6,730.0 GWh, an increase of 182.3% compared to the actual capacity in the first half of 2023.

In terms of demand, the global demand for power (energy storage) batteries in 2023 and 2026 will be 1,096.5 GWh and 2,614.6 GWh, respectively. The nominal capacity utilization rate of the entire industry will decrease from 46.0% in 2023 to 38.8% in 2026.

The structural overcapacity and destocking pressure in the battery industry will continue, and a large amount of capacity is expected to be sold with a price advantage in the absence of obvious technological breakthroughs.

In addition, since 2020, to address concerns about power battery supply and enhance their voice in the industry chain, many automakers have released plans for self-developed and self-produced power batteries. According to Battery China's analysis, by the end of 2023, domestic automakers such as BYD, Great Wall Motors, NIO, Geely, GAC Group, Changan Automobile, Ideal Automobile, China FAW Group, Chery Group, SAIC Group, and JAC Motors have gradually implemented their plans for self-developed and self-produced power batteries. To control costs and take the initiative, more and more automakers are joining the ranks of developing their own batteries or increasing technological reserves.

In 2024, the "battle between oil and electricity" enters a critical year, with intensified market competition. The extent to which the core component, the battery, will reduce in price becomes a focal point for the industry.

Recently, Dongwu Securities analyzed that from a cost perspective, the domestic mid-to-low-end battery prices have fallen to the level of cash costs, and prices have basically bottomed out. In the second half of 2023 to the present, domestic battery prices have dropped rapidly, with the price of lithium carbonate decreasing. Adding factors such as destocking, competition has become fierce. In February 2024, the price of iron phosphate power battery cells was 0.4 yuan/Wh (including tax), approaching the cost price.

Dongwu Securities gave an example, calculating based on a lithium carbonate price of 95,000 yuan per ton, the cost of iron phosphate battery cell BOM (Bill of Materials) is 0.27 yuan/Wh, manufacturing cost is 0.06 yuan/Wh, considering a 95% yield and 70% capacity utilization rate, the cell cost is 0.37 yuan/Wh (excluding tax), and the tax-inclusive cost has exceeded 0.4 yuan/Wh. Some iron phosphate battery cells have dropped to the cash cost.

Dongwu Securities pointed out that from a raw material perspective, there is still room for lithium carbonate to fall to 80,000 yuan, and the downward space for most midstream material prices is limited. Therefore, the future impact of raw materials on battery prices is expected to be only 0.01-0.02 yuan/Wh, and the downward space is very limited.

Yuan Qingjiao, Secretary-General of the Zhongguancun New Battery Technology Innovation Alliance and Chairman of the Battery Hundred People Association, pointed out that in 2024, the new energy battery race has reached a critical point, driving the industry from internal competition to rational game. The industry is facing multiple challenges, including continuous destocking of products, a slowdown in industry expansion, ongoing difficulties in opening up overseas markets, and intensified challenges in the intelligentization of

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